The agreement will allow the South to deploy missiles with a range of 800 kilometres, up from the current limit of 300 kilometres, National Security Advisor Chun Yung-Woo told reporters.
The extension will not only bring the whole of North Korea within reach of Seoul's rockets, but also parts of China and Japan.
The US stations 28,500 troops in South Korea and guarantees a nuclear "umbrella" in case of any atomic attack. In return, Seoul accepts limits on its missile capabilities.
An agreement signed with the US in 2001 -- the year South Korea joined the Missile Technology Control Regime (MTCR) -- restricted Seoul to rockets with a range of 300 kilometres and a payload of 500 kilograms.
Given the ambitions of nuclear-armed North Korea's own missile programme, the South has long argued for the limits to be extended and negotiations took on a new urgency after a failed rocket launch by the North in April.
Pyongyang insisted its aim was to put a satellite into orbit, but the US and its allies saw the attempted launch as a disguised long-range missile test banned under UN resolutions.
Chun said the new deal, which will take the range of South Korea's missiles well beyond MTCR limits, was aimed at "securing a more comprehensive response to missile threats" by the North.
The maximum payload for the maximum 800-kilometre range will remain at 500 kilograms, but Chun stressed the two parameters were inversely linked, so that for shorter ranges corresponding payload increases would be allowed.
There was no immediate comment from the US State Department, but Washington has previously made it clear it considers South Korea a special proliferation case, given the threat posed by the North.
Analysts warned the new deal may accelerate an arms race in northeast Asia and weaken Seoul's arguments against the North's nuclear and missile programmes.
"The South certainly has every right to defend itself from threats of the North," said Yang Moo-Jin of the University of North Korean Studies in Seoul.
( Business standard )